Demographic changes in vietnam challenges for old age support and implications for social protection policy

Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 Demographic Changes in Vietnam: Challenges for Old-age Support and Implications for Social Protection Policy Dang Nguyen Anh* Abstract: In this article, the author examines an important emerged question of policy and practice on how to adapt effectively to the demographic changes in today’s Vietnam The dramatic decline of fertility, the demographic bonus, increased mobility, rising longevity and rapid population aging, in particular, have brought in both opportunities and challenges in the next 20 years As Vietnamese society ages rapidly, the demand for formal aged and long-term care rises as well and there is a need for a more consolidated and coherent policy and reforming the current system of social pension and social protection The author maintains that the fragmented programs and financing, inadequate services ò ola-age care and support are a barrier to improve the effectiveness of social protection and pension scheme Many implications and options for policy have been proposed and discussed to overcome the challenges This will require significant investment, improved outreach, greater harmonization of information systems and development of qualified human resources for old-age care and support Keywords: Demographic changes; Ageing; Old-age care and support; Social Protection; Pension Received 2nd October 2017; Revised 20th October 2017; Accepted 30th October 2017 Demographic Changes* the most rapidly aging societies in the world According to the UN population projection, the share of the old population that is over 65 will rise quickly in the next 45 years (Figure 1) Vietnam is currently facing a farreaching evolution in the age structure of its population Over the last two decades, Vietnam has cashed in its “demographic dividend” - the economic growth boost generated by a bulge in the share of the population that is of working age This has been considered a great opportunity for the national development However, the dividend is nearly spent as the working-age share peaked in 2013 and is now in decline More importantly, in 2015 Vietnam has reached a turning point in the size of its old age population and will soon become one of * Vietnam Academy of Social Sciences; email: danganhphat1609@gmail.com 609 610 Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 Figure 1: Age Structure Change in Vietnam: 1975-2075 Source: UN Population Projections This demographic transformation has a number of consequences for the country First, the decline in the working age population will mean that a key driver of Vietnam’s rapid per capita growth will diminish, making human capital deepening and other sources of productivity growth even more vital for sustaining high growth Second, the country will face serious fiscal challenges driven by the increasing burden on the pension and health systems related to the old-age support Third, institutional arrangements for the provision of care to the elderly will quickly become a major concern as they are yet ready Vietnam’s social protection system is in a transitional phase as it moves from being primarily reliant on informal, traditional sources of support toward a greater and more coherent role for the state As countries transition from low to uppermiddle income, their social protection systems typically grow in terms of GDP and public spending share While social protection spending tends to rise over time and as countries get richer, falling rates of absolute poverty also drive a reorientation of social protection spending toward higher (and wider coverage) spending on social insurance, and a stronger linkage between social assistance and active labor programs As a part of the demographic changes, Vietnam’s fertility has declined dramatically over the last decades The total fertility rate (TFR) was approximately in 1980 but dropped rapidly over the following two decades until it reached replacement rate (2.1) in 2005 The decline was the result of a combination of factors (Dang Nguyen Anh 2014) One set of driving factors has been the changing demand for children As in other countries that have gone through a period of rapid development, the changing economic environment has reduced the number of children desired by a typical couple With declines in child mortality, having a large number of children is no longer necessary for a family to ensure that some children survive to adult age to care for their parents Additionally, as economic opportunities have improved overall, the value of parents’ time-particularly for Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 women-has increased, making the childcare commitment required for a large family less attractive Finally, as the family incomes have increased, they want to invest more in each child (for higher “quality” children in economic terms), which increases the cost of each child and further discourages a large number of children The second factor is government policy in the form of the “1-or-2 child policy” The family planning program has its origins in policies targeting reduced population growth introduced first in 1961 A policy decision in 1989 stipulated 1-2 children per family and 3-5 years birth spacing and strong recommendations for later age at marriage This approach was reiterated by a decision in 1993 which targeted 1-2 children per family to stabilize the population size, with the slogan “stop at two children for a good education and rearing.” The program 611 introduced under these decisions consisted of campaigns to encourage families to have no more than two children and free provision of contraceptives, particularly intrauterine devices (IUDs) Although the program was said to be routed in a principal of volunteerism, local implementation sometimes had coercive elements More recently, the policy has been less rigorously enforced and become relaxed for many nonstate employees It is mainly relevant for government employees and party members As a result, fertility appears to have increased slightly in recent years The TFR is estimated to have reached a low point of 2.0 in 2010 and 2011 but rose to 2.1 in 2014 This slight increase may have been related to changes (2011) in the message of the government’s family planning program, which may have been perceived as a loosening of the two-child limit (Figure 2) Figure 2: Total Fertility Rate and Sex Ratio at Birth over time in Vietnam Source: 1989, 1999 and 2009: Population and Housing Census; other years: Population Change and Family Planning Surveys The sex ratio at birth (SRB) has increased dramatically since 1999 Vietnam’s level of the SRB, measured as the number of male births per 100 female births, was in the normal range of 105-106 in 1979 and 1989 However, starting in 1999, the SRB has risen rapidly, reaching nearly 114 in 2013, placing it along with India and China among the current countries with the highest SRBs of the world This imbalance 612 Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 will result in a large number of surplus males starting in approximately 20 years, which may result in an increased level of social evils, prostitution, violence, and trafficking in women and girls The high sex ratio at birth is the result of a combination of factors These include the traditional high value placed by Vietnamese families on son preference, the ready availability of sex identification of fetuses through modern ultrasound technology, which makes a sex-selective abortion possible One of the main drivers of son preference is the fact that sons traditionally have the main responsibility for taking care of parents in old age The two-child policy is also likely to be a contributing factor for the high SRB as most couples wish to have at least a son for continuity of their lineage The government is now drafting a new Population Law regarding the population issues in the next decades One possibility under consideration is a further loosening of the two-child limit, which has generated interest in the likely consequences of such a policy change Although the impact is highly uncertain, the slight increase in TFR that took place during the 2012-14 period, possibly as the result of a perceived policy shift, making the population managers afraid that a full elimination of the policy may well result in higher fertility However, this change would most likely be modest and fertility decline trend is irreversible (Dang Nguyen Anh 2014) The broader economic dynamics of fertility change are probably more important determining factors than the two-child policy In an increasingly prosperous Vietnam, the high opportunity cost of time and the desire to invest greatly in each child have reduced the desired family size and adopt fertility control It is likely that to some extent removing the two-child policy will reduce the sex ratio at birth Given the option to have a larger number of children, couples with strong preferences for sons may be less likely to abort a first or second child if their sex is female Easing of the two-child policy, however, will most likely not reverse the sex ratio trend completely and quickly Existing government legislation to prohibit sex identification of fetuses in order to reduce sex-selective abortions has not proven effective Surveys have shown that very large majorities of women in the later stages of pregnancy know the sex of their fetuses The current imbalance in the SRB will probably only change substantially as parental preferences evolve Government policy may be able to speed this evolution through various measures One way is through public campaigns that emphasize the value of daughters and promotes gender equity A second approach is to ensure that the government provides sufficient old-age support to lessen the concern of parents worried about having a male offspring to support them in their later years Challenges for Old-age Support and Implications for Social Protection Policy An overarching question in social protection reform is the appropriate role of the state and citizens in providing social protection support of different forms - what is the emerging social assistance in Vietnam and how is it likely to evolve over the coming two decades? For social insurance as well as healthcare, profound changes will be driven by the extremely rapid aging of the population Vietnam is at the inflection point, as large numbers of people leave the Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 work force and the old age population swells A common measure of the age structure of a population is the old age dependency ratio - the number of people over age 65 for every 100 people age 15-64 As depicted in Figure 3, the old age dependency ratio has been roughly constant for decades, but it 613 will climb steeply in the next 20 years (2015-2035) and continue to rocket in the following decades In other words, Vietnam will soon have many more old-age people to support for every person of working age (Figure 3) Expanding social insurance coverage is both vital and challenging in the context of the society’s rapid aging Figure 3: Old Age Dependency Ratio in Vietnam: 1975-2075 Source: United Nations World Population Prospects (2015) There are two forces behind the aging process The first force is declining fertility As aforementioned, people are having fewer babies, and this decreases the relative number of the young The fertility of Vietnam is at the replacement level (2.1) Fertility rates are well beneath replacement in urban Vietnam They are near in almost every rural province The second force is rising life expectancy People are living longer in Vietnam, and this increases the relative number of the old Life expectancy today is 75 years for females and 73 years for males (GSO 2015) The rapidly aging population also generated a critical need for long-term care The rising tide of non-communicable diseases associated with the aging process is the major medical challenge to be addressed Chronic illness and injuries account for 70% of the disease burden in many old-age societies Specific health interventions must be delivered within the context of a broader institutional and policy environment However, the system of health service delivery suffers from several key shortcomings Substantial reforms to the current model are obviously needed, and there is little time to lose because rapid aging and rising incomes will lead to a greater increase in the demand for health services in the years ahead This is partly driven by the demographic change characterized by a low fertility and rapid aging, as well as influenced by the poor system of health provisions in Vietnam The appropriate role of the state and families in providing social protection and 614 Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 support for old-age The assumption of the family as the permanent primary source of support is increasingly open to question Among non-family providers, even if nonstate sector providers are gradually expected to play more of a role, the government will remain paramount in the short and long terms, being the primary financier and provider for both social protection and safety-net The above process is likely to be driven by increased wealth combined with greater income volatility, urbanization, and greater mobility of people, all of which change the expectations of people from the state, especially among younger generations The traditional role of the family in retirement security is receding The assumption of the family as the permanent primary source of support is increasingly open to question, with the majority of adult people in Asia expecting governments to be their primary source of support in old age, including Vietnam (Figure 4) In the next 20 years, one will see a fundamental rebalancing of the relative roles of citizens and the state in social protection, driven by demographics of a low fertility, aging society It is likely to be driven by changing social attitudes, life satisfaction and greater mobility of people All of these change the expectations of citizens, especially among the younger generations Figure 4: Changing attitudes on primary source of support in old age Source: GAI (2015) Question “Who ideally should be most responsible for providing income to retired people?” It is undeniable, however, that the primary financer and main provider would likely remain the state for both social insurance and social safety nets What the government needs to focus on is the regulatory and contracting framework for the participation of for-profit and not-forprofit private sector and civil organizations in ways that ensure basic service standards, fiduciary compliance, performance monitoring, and transparency Social protection is an area where collaboration with other partners such as unions, employer associations, business, civic groups is vital In general, countries transition from lowto upper-middle income, their social protection systems typically grow in terms of GDP and public spending share While spending on social protection tends to rise Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 over time and as countries get richer, falling rates of absolute poverty also drive a reorientation of social protection spending toward higher (and wider coverage) spending on social insurance, and a stronger linkage between social assistance and active labor programs A number of questions related to social protection can be asked How the tax and transfer system figure in the government’s redistribution policies? And how such policies interact with economic growth? In many countries, social protection addresses the problem of inequality, tax/transfer systems are the primary vehicle for redistributive public policies In Vietnam, the explicit and implicit subsidies accruing to the publicand formal-private-sector workers through pensions more than offset the targeted distribution through social assistance Achieving sensible redistribution through social protection can foster social stability, address inequality, and help sustain economic growth Vietnam’s social insurance and pension coverage target is currently ambitious and is very unlikely to be reached by the year 2020 under the current policy and financing approach Vietnam’s social protection system is currently in a transitional phase, it moves from being primarily reliant on informal, traditional sources of support toward a greater and more coherent role for the state A question to raise is how Vietnam would be able to secure adequate financial protection for its growing old-age population in a fiscally sustainable way Essentially, the country is “losing the race” between pension coverage expansion and rapid aging First, looking at the country’s recent modest performance in the expansion 615 of contributory scheme participation suggests that a target closer to 30 percent is likely to be realistic by 2030, and even that will need continued improvements in program administration The bigger question is whether the existing combination of a purely contributory model for the formal pension scheme and a low coverage social pension approach will ever be sufficient to achieve significant coverage beyond the formal sector Aging or retirement can be a time of considerable insecurity for many adults in today’s Vietnam Global experience suggests this is unlikely and that Vietnam risks stagnating its pension coverage expansion at around 30 percent of the labor force in the contributory scheme and a further 20 percent of elderly in social pensions of some form In terms of public spending on pensions, Vietnam is slightly below the global average for its share of population 60 years and older (Figure 5) The risk is that it will move quickly to the right in the figure due to rapid aging, just as it faces financing constraints on increased spending Looking to the future, two strategic questions emerge for social security development First, how will Vietnam create a social security system geared towards the risks faced by all people in society, as opposed to the current system which serves largely those at the top (wealthy) and bottom (poor) of the distribution? And what financing strategies can make this a reality? Second, how will Vietnam assure adequate financial protection for its growing old age population that is fiscally sustainable and resilient under financial crises? 616 Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 Figure 5: As Vietnam moves to upper-middle-income status, pension coverage should increase Source: World Bank Pension Database (2014) Coverage of contributory pensions in Vietnam remains very low, the top 20 percent are in formal pension schemes and a small bottom segment is covered by targeted social pensions, but the majority of the population not have any pension until age 80 Figure shows the global relationship between share of working age population in contributory pension schemes and GDP per capita While Vietnam is around where one might expect given its income level, it now faces a major challenge to expand coverage and follow the trajectory of successful more developed countries in Asia such as Japan, South Korea Vietnam recognizes this challenge and has set the goal of 50 percent pension coverage by 2020, but it does not as yet have a viable strategy how to reach that goal and beyond The pension coverage expansion target that Vietnam has set is ambitious Without publicly-financed subsidies for the informal sector, it would not be achieved Public subsidies will almost certainly be necessary to induce informal sector workers to join contributory schemes voluntarily (as with health insurance contributions for the near poor in Vietnam) Other countries like China, Thailand, and South Korea demonstrate that innovation in the current approach in Vietnam will be needed to achieve substantial coverage expansion The approaches that have worked elsewhereoften in combination-are: (i) to provide a match on contributions for informal workers to incentivize their participation in contributory schemes; and/or (ii) to lower the age for access to social pensions significantly, perhaps in a phased manner These could become universal for those without a formal sector pension from around age 65 In the long run, to achieve major coverage expansion would require further parametric reforms of the existing pension system The formal sector pension scheme, despite reforms in 2014, is not financially sustainable It will begin to incur deficits from the 2020s and exhaust all accumulations beyond 2030 Even at current coverage levels, the country cannot afford both the current unreformed system and the subsidies that will be needed to expand coverage to informal workers The reforms should include gradual increases in official retirement age, removing incentives for Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 early retirement, further reduction in the annual accrual rate while broadening the base for collections to full wages, reduction in special categories, and other measures Discussion and conclusion A cross-cutting issue in today’s Vietnam is reorienting policies to adapt effectively to the country’s demographic changes The diminishing “demographic window of opportunity”, a dramatic decline in fertility, rising longevity, increased mobility of people and urbanization, and especially rapid aging all have combined to create a new demographic landscape for Vietnam over the next decades Within that context, the working age population will start to shrink as aging process accelerates There will be fewer children to educate and rear, whereas demand for different types of health services will escalate This will, in turn, create new needs (for old age protection and long-term care for example), greater pressure in human resource development and the labor market for a higher productivity, and new challenges in governance to ensure livable and inclusive As Vietnamese society ages rapidly, the demand for formal aged and long-term care (ALTC) that goes beyond traditional family support will grow rapidly ALTC systems in Vietnam remains nascent, but a growing number of countries are grappling with the appropriate and sustainable role of the state There is significant demand for ALTC in different forms, ranging from low-level social support to support in self-care activities of daily living While there is a need for greater public support, it is equally clear that the state cannot “do it all” and the expressed preferences of older people in the 617 EAP region are typically for care at home or in the community (“aging in place”) Although there is no clear evidence from international experience that either public or private provision is “better”-what matters most is strong accountability and efficiency There will be some entry of the private and not-for-profit sectors over time required in such areas as voluntary pensions, potentially active labor programs, and social work, etc There may be specific roles for communities and the private sector in social service delivery, such as validation of targeting decisions, payment system development, applying informatics technology in service delivery and so on While there will be a segment of older people who require residential care, more humane and fiscally sustainable ALTC systems should be built around a system of home - and community-based - care The framework is the “continuum of care”, whereby the large majority of older people in need of care receive it at (through outreach services), those with somewhat higher needs access community-based care, and only a small and very frail portion require residential care In China, for example, the national policy aimed that around 90 percent of people should be cared for at home, percent in the community and percent in residential care There is a need for a more consolidated and coherent approach to old-age support Rather than multiple fragmented programs with overlapping target groups and objectives, it would be desirable to provide a more coherent package of support Fragmentation leads to high costs and poor delivery of programs A more consolidated and social pension scheme could better leverage human development outcomes, and be scalable to respond to economic crises 618 Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 As social protection for the aged depends very much on pension system and social insurance The Vietnamese government is aiming to achieve sustainability in its existing formal sector pension system Coverage expansion and controlling deficits in the existing pension system is essential to creating the fiscal space for general revenue to fund old-age support The social insurance reforms are a move in the right direction, but the slow pace of phase-in and ineffective This suggests that the formal pension scheme remains unsustainable and will need further reforms and adjustment, without which the pension system will most likely reach a crisis during the 2020s There is a need for a stronger coordinating mechanism across agencies to develop a more coherent strategy for reforms, linking social insurance and social assistance, which currently operate in silos A fundamental reappraisal of the roles (policies, financing, and implementation) of national and local governments is needed, including implications for fiscal decentralization There is a need to deepen the consolidation of delivery systems in the interests of efficiency, transparency and user friendliness This will require significant investment in payment systems, improved outreach, and case management mechanisms Greater harmonization of delivery platforms and information systems will in particular help deal with an increasingly mobile society Institutionally, the continuum of care provides a bridge from social welfare services to care in the health system at higher levels of need It is also important to distinguish financing from provision While the state may provide financing for ALTC at different levels (for all but the poor, usually with co-payment), there is likely to be a major potential role for the private sector in provision of ALTC But this will in turn place new demands on the state for standard setting, monitoring, and regulation of quality and market rules of the game Human resource development in the caring industry should be prepared from now References Dang Nguyen Anh 2014 Fertility and Population Policies in Vietnam Paper presentation at the International Seminar on Population Policies in Asia on 30 Oct 2014, Seoul, Korea Global Aging Institute 2015 From Challenge to Opportunities: Retirement Survey GAI: Singapore General Statistical Office Population and Housing Census 1989, 1999, 2009 General Statistical Office Population Change and Family Planning Surveys 2010, 2014 General Statistical Office 2015 The 1/4/2014 Vietnam Intercensal Population and Housing Survey: Major Findings Ministry of Planning and Investment Hanoi United Nations 2015 World Population Prospects Population Projections: Revision (medium variant) New York World Bank 2014 Worldwide Pension Database Washington DC Dang Nguyen Anh / Journal of Social Sciences and Humanities, Vol 3, No (2017) 609-618 Biến đổi nhân học Việt Nam: Thách thức hỗ trợ tuổi già hàm ý sách an sinh xã hội Đặng Nguyên Anh Tóm tắt: Trong viết này, tác giả xem xét câu hỏi quan trọng bật sách thực tiễn, làm để thích ứng với thay đổi nhân học Việt Nam Sự suy giảm mạnh mức sinh, dư lợi dân số, gia tăng di cư tuổi thọ, già hóa dân số dẫn đến hội thách thức 20 năm tới Khi xã hội Việt Nam già nhanh, nhu cầu hỗ trợ người cao tuổi chăm sóc lâu dài địi hỏi sách đồng cải cách hệ thống lương hưu an sinh xã hội Tác giả cho chương trình tài phân tán, thiếu hụt dịch vụ chăm sóc hỗ trợ rào cản để nâng cao hiệu hệ thống an sinh xã hội hưu trí Nhiều gợi ý lựa chọn sách đề xuất thảo luận phần cuối nhằm vượt qua thách thức Điều đòi hỏi đầu tư thỏa đáng, mở rộng phạm vi, thống hệ thống thông tin quản lý, đào tạo nguồn nhân lực có chất lượng cơng tác chăm sóc hỗ trợ người cao tuổi Từ khóa: Biến đổi nhân khẩu; già hóa dân số; hỗ trợ chăm sóc tuổi già; an sinh xã hội; hưu trí  ... them in their later years Challenges for Old- age Support and Implications for Social Protection Policy An overarching question in social protection reform is the appropriate role of the state and. .. decades In other words, Vietnam will soon have many more old- age people to support for every person of working age (Figure 3) Expanding social insurance coverage is both vital and challenging in the... citizens in providing social protection support of different forms - what is the emerging social assistance in Vietnam and how is it likely to evolve over the coming two decades? For social insurance